DoTr rejects Sobrepeña proposal to upgrade MRT 3

MRT Holdings Inc. wants to invest an additional $800 million (roughly P42.12 billion) to fix the immediate problems of Metro Rail Transit Line 3 (MRT 3) in three phases.

The Department of Transportation (DOTr), however, found the proposals of businessman Robert John L. Sobrepeña unacceptable due to onerous provisions that mimic the old and controversial build-lease-transfer (BLT) agreement for the MRT 3.

Also, Filipino taxpayers would have paid the MRT Corp. (MRTC) roughly P200 billion by the end of its concession period—equivalent to six more railway lines.  Under the three-phased proposal, the private sector will start fixing the train line’s immediate problems, namely the system’s dilapidated rails, outdated signaling system and its failing train cars.

The next phase involves the upgrade of the whole system, which costs about $400 million. It involves the replacement of all elevators, escalators and the makeover of the stations. Under the plan, the private company will also buy 48 new cars to double the line’s capacity to between 1 million and  1.2 million passengers daily. The third phase involves the linking of the MRT to the Light Rail Transit Line 1’s Monumento Station.

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“It is largely based not just on continuing, but even expanding, what MRTC gets under the BLT agreement,” the agency said.

To date, the private company that owns the railway facility has received about P133.7 billion, DOTr data showed. Broken down, the amount is for P73.7 billion in return for equity, P32.4 billion in payment for debts, P436.5 million for staffing and administration costs, P27.2 billion for tax payments.

The company built the train line in 2000 for P35.6 billion.

“By 2025 MRTC stands to receive close to P200 billion in return for its P35.6 billion investment,” the agency said. “Nominally, Filipino taxpayers will be paying MRTC the equivalent of almost six MRT 3’s in exchange for building one MRT 3.”

The DOTr said the proposal of Sobrepeña will lead to the company’s reaping more revenues despite numerous cases against the government. It said the offer sought for a P3-billion per year revenue share up to 2040, “without the benefit of any bidding, or even a Swiss challenge.”

“The option also involves an unspecified schedule of fare increases,” the DOTr said, but quickly added the fare matrix will “increase MRT 3 fares from the current maximum of P28 to up to almost P40.”

It, therefore, involves paying Sobrepeña’s company “up to more than P10 billion in fare revenues over a period extending to 2040.”

The Sobrepeña-MRTC Option involves giving to MRTC up to more than P10 billion per year in fare revenues over a period extending to 2040, again, without the benefit of any bidding, or even a Swiss challenge.

“Notably, the option also involves extending onerous terms of the BLT agreement beyond 2025, and into 2040. For example, it requires Filipino taxpayers to continue reimbursing MRTC for all its taxes,” the agency said.

Since it was submitted to the Duterte administration, the proposal has been denied twice by the transportation department in 2017.

In a text message to the BusinessMirror, Sobrepeña said he is curious why the transportation department continues to refuse his proposal which, to him, is the best solution for the MRT 3.

For now, the transportation department is pursuing a official development assistance deal with the Japanese government.

The P16.98-billion loan facility will be used to cover the railway line’s trains, power supply system, overhead catenary system, radio system, closed-circuit television system, public address system, signaling system, rail tracks, road rail vehicles, depot equipment, elevators and escalators and other station building equipment. Tentatively, the whole deal will take about three and a half years—31 months for the simultaneous rehabilitation and maintenance works to restore train system to its original design condition and capacity, and a year for the defect liability period.

Talks for the assistance started last year. January saw the exchange of note verbale between the two governments.

Signing the agreement is tentatively set for this month.

 

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